The first round of negotiations of the TTIP (Transatlantic Trade and Investment Partnership) between the EU and the US was held in Washington, DC during the second week in July.

The EU and US account for about half of world trade flows. Discussions about a transatlantic trade agreement have been ongoing in different forms for many years in an attempt to overcome transatlantic trade barriers. In February 2013, EU and US leaders announced the launch of the TTIP. With today’s more and more integrated global production chains, as well as the financial crisis still looming, a transatlantic trade agreement is just right in time.

Many studies have been conducted on the possible effect of the TTIP on the transatlantic trade. Although the results and the methods differ, some general conclusions can be drawn of the positive effect the agreement will bring to both economies:

• The main expected gains are not in tariff reduction but in the dismantling of regulatory barriers such as costly certification schemes and difference in technical standards, which will bring significant economic gains to both parties. Over 80% of the expected gains from an EU-US trade deal come from the reduction of non-tariff barriers.

• Studies also show that, although not remarkably, the US would gain more with regards to tariff reduction from the TTIP than the EU when it comes to GDP and per capita income. This is mainly because EU countries already have low trade barriers.

• The agreement is also expected to bring important welfare gains and job creation. This will lead to a rise in employment rates in the US, EU and the OECD countries, which is of interest to both parties due to the economic crisis.

• The TTIP will lead to an increase in trade between the parties which could have a spill-over effect on other trading partners. At the same time the focus of the trade flows will shift, which might have a negative effect on trade for third countries. All in all a shift in the world trade balance will occur.

The negotiations will not be an easy task to achieve. The EU and the US have very different approaches and models in many areas, especially in the regulatory field, and are both strong negotiating partners that are used to imposing their own model on their counterparts. The time-frame for the completion of the negotiations, autumn 2014, is ambitious although it is highly unlikely that the negotiations will conclude by this time.

Due to the magnitude of these two economies, it is important to design the TTIP in a way so that the agreement does not only have a positive impact on the bilateral trade and the EU and US economies, but that it has a global viewpoint, bringing gains to other trading partners and contributing to the advancement of the multilateral trade system. This should be achieved through comprehensive talks and flexibility needs to be showed by both sides.

There is a long way to go, and there will be many bumps in the road, but the TTIP has enormous potential. If successfully completed, the TTIP will be the most ambitious free trade agreement ever negotiated and will create the world’s largest free-trade area, with the possibility of changing the trade patterns of the entire world.

Jana Nackberg is a legal adviser on trade policy at the Swedish National Board of Trade. Jana deals with international trade negotiations as well as issues pertaining to the EU’s trade policy and WTO affairs. Prior to joining the Board she worked at the trade section of the Swedish Permanent Representation to the EU in Brussels. Jana holds an LLM with a focus on EU law and International Trade Law from Uppsala University (Sweden) and Tilburg University (the Netherlands). The views expressed in this article are of the author solely and should not be associated with the National Board of Trade.